With the stock market showing little sign of any serious recovery, and inflation high, some of you are likely to be considering investing in gold. If you are, you need to know the pros and cons.
Experts differ widely on the matter. Some feel this is just not the right time to invest in gold, considering the commodity's price has risen sharply, and may soon do what the stock market did under similar circumstances --crash. The price of gold is already at its peak and even a gain of 5% at this level seems quite difficult. Investment is not advisable at this price.
But there are others who feel just the opposite. This is the right time to get into gold as forecasts suggest that the price is set to touch Rs 15,000 or more.
Wealth managers feel an investment portfolio with an allocation to gold improves the consistency of portfolio performance during both stable and unstable periods. It's also liquid in nature and can be easily converted into hard currency.
Since gold is likely to do well in the long term, investing in gold should do well. However, considering that the market is volatile and prices have run up substantially, the buying should be spread out over a period.
In international markets, investors move substantial investments into gold when the outlook on equities is negative.
Gold prices also tend to increase in times of inflation, rise in crude oil prices and a depreciating US dollar. But bullion markets also follow a cycle, and gold has been volatile lately. So one needs to be cautious.
The best way to invest in gold may be through monthly systematic investments into gold funds.
There are a few funds that invest in gold and precious metal mining companies. These are feeder funds (investing in another global fund), hence they have a good track record and the required expertise to enhance the scope of returns as they are not solely dependant on gold prices.
Another way to stay invested in gold is to buy gold exchange traded funds (ETF)s.
If the investment is for a short time, then it's better to buy gold exchange traded funds which track the price of gold. There are funds, which invest in gold mining companies, such as the DSP ML World Gold Fund and AIG Gold Fund.
THINGS TO KNOW:
The mode of investment is important. When one is buying gold biscuits, the re-saleability should be kept in mind. Some banks may sell gold biscuits with certification, however they may not buy it back and at the time of selling it to the local jeweller, you can incur various costs.
Gold has become volatile, hence it is useful to spread the risk. The long-term trend is positive and hence should deliver good returns. However, gold has normally delivered lower returns than equity, hence expectations over the long term needs to be lower.
What are Gold ETFs?
Gold ETFs are open-ended mutual fund schemes, which will invest the money in standard gold bullion (0.995 purity). The investor's holding will be denoted in units, which will be listed on a stock exchange. One needs to have a demat account to trade in ETFs.
Just as one would buy/sell any stock on the exchange, you can do that with ETFs. These are passively managed funds and are designed to provide returns by tracking the returns from physical gold in the spot market.
Experts differ widely on the matter. Some feel this is just not the right time to invest in gold, considering the commodity's price has risen sharply, and may soon do what the stock market did under similar circumstances --crash. The price of gold is already at its peak and even a gain of 5% at this level seems quite difficult. Investment is not advisable at this price.
But there are others who feel just the opposite. This is the right time to get into gold as forecasts suggest that the price is set to touch Rs 15,000 or more.
Wealth managers feel an investment portfolio with an allocation to gold improves the consistency of portfolio performance during both stable and unstable periods. It's also liquid in nature and can be easily converted into hard currency.
Since gold is likely to do well in the long term, investing in gold should do well. However, considering that the market is volatile and prices have run up substantially, the buying should be spread out over a period.
In international markets, investors move substantial investments into gold when the outlook on equities is negative.
Gold prices also tend to increase in times of inflation, rise in crude oil prices and a depreciating US dollar. But bullion markets also follow a cycle, and gold has been volatile lately. So one needs to be cautious.
The best way to invest in gold may be through monthly systematic investments into gold funds.
There are a few funds that invest in gold and precious metal mining companies. These are feeder funds (investing in another global fund), hence they have a good track record and the required expertise to enhance the scope of returns as they are not solely dependant on gold prices.
Another way to stay invested in gold is to buy gold exchange traded funds (ETF)s.
If the investment is for a short time, then it's better to buy gold exchange traded funds which track the price of gold. There are funds, which invest in gold mining companies, such as the DSP ML World Gold Fund and AIG Gold Fund.
THINGS TO KNOW:
The mode of investment is important. When one is buying gold biscuits, the re-saleability should be kept in mind. Some banks may sell gold biscuits with certification, however they may not buy it back and at the time of selling it to the local jeweller, you can incur various costs.
Gold has become volatile, hence it is useful to spread the risk. The long-term trend is positive and hence should deliver good returns. However, gold has normally delivered lower returns than equity, hence expectations over the long term needs to be lower.
What are Gold ETFs?
Gold ETFs are open-ended mutual fund schemes, which will invest the money in standard gold bullion (0.995 purity). The investor's holding will be denoted in units, which will be listed on a stock exchange. One needs to have a demat account to trade in ETFs.
Just as one would buy/sell any stock on the exchange, you can do that with ETFs. These are passively managed funds and are designed to provide returns by tracking the returns from physical gold in the spot market.
